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Renewed activity for luxury stores in Europe as international travellers return

By Danielle Wightman-Stone


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Image: Bond Street

Luxury store openings in Europe increased by 77 percent in 2022, as the continent welcomed back international visitors looking to spend on luxury brands, according to international estate agent Savills.

Research from Savills Global Luxury report found that the strong performance across Europe saw its global share of new openings climb to 23 percent, ranking it second to China and ahead of North America.

Anthony Selwyn, co-head of prime global retail at Savills, said in a statement: “A relatively fast recovery in luxury spend in the region, helped in part by the return of international visitors, has no doubt helped move Europe back up the agenda for expanding luxury brands.

“Likewise, a rebasing of rents on a number of key luxury streets, combined with improved availability in some cases, has bolstered leasing activity further.”

For instance, Savills adds that London’s Bond Street saw indicative prime headline rents soften by 27 percent between December 2019 and December 2021 and while rental growth has returned, as of Q1 2023 rents are still 17 percent below their pre-covid peak.

Middle East enjoys uplift in luxury store openings in 2022

As well as Europe, the Middle East also enjoyed an uplift in luxury openings, seeing a 125 percent increase on 2021, albeit from a relatively low base. Savills said this continues the trend seen during the pandemic, as luxury brands refocus on relatively underserved affluent markets, with Dubai remaining a primary focus alongside emerging locations such as Doha, Qatar. As a result, the region saw its market share of global new openings double to 6 percent.

Globally, there was an 11 percent increase in new luxury store openings in 2022, compared to the previous year, showing the market continues to outperform the wider retail sector. China continues to dominate, accounting for 41 percent of all new openings, driven by brands' continued focus on that market, particularly over the first half of the year, as Chinese luxury spend remains largely confined to its domestic market.

However, there was a decrease in the total number of luxury openings in China compared with 2021, with weakened occupier confidence likely impacting new acquisitions in the face of rolling lockdowns throughout some parts of the country, added Savills.

Image: GPE; New Bond Street, London

London remains one of the most “active luxury markets” in Europe

Marie Hickey, commercial research director at Savills, added: “While we have seen a strong number of openings across traditional luxury markets, what has become increasingly clear is that brands are now open to a wider variety locations, a trend we expect to continue.

“While the major luxury destinations of Milan, London and New York will continue to hold the greatest appeal to many acquisitive luxury brands, availability challenges in these markets will temper activity over the next 12-18 months, meaning new store activity in markets beyond this top tier will continue to expand.”

In the report, Selwyn notes that London was one of the most “active luxury markets” in Europe last year, with the highest number of store openings. The activity focused on Bond Street, and Savills expects that demand and short supply will drive rent increases over the next 12-24 months, especially for the central part of the street, where Gucci recently secured a new space.

Savills – where next for luxury stores

When it comes to luxury store opportunities to watch, Savills states that along with the northern segment of Bond Street where there are redevelopment projects ongoing, brands should be looking at large-scale urban mixed-use developments in Vancouver and Montreal, Canada. This includes the Oakridge Park, Vancouver joint venture between Westbank and QuadReal where the retail element, expected to be completed 2024/25 will extend to 1.2 million square feet, while Royalmount, backed by L’Catterton in partnership with Carbonleo slated for completion in 2024, will offer more than 170 stores with Louis Vuitton, Gucci and Tiffany already committed to the scheme.

There are also opportunities in Silicon Valley near Stanford University, California, a 100 million US dollar mixed-used development envisioned to be the region's answer to Rodeo Drive with a highly affluent catchment. The first phase is planned for competition in late 2023, brands already signed to the scheme include Roger Dubuis and Bulgari.

Savills has also singled out Saudi Arabia in the Middle East due to its sizeable young and affluent population. It states that the country’s strategy to diversify its economy is delivering new developments and opportunities for expansive brands, as well as the fact that direct operation of stores has become easier but partnerships are still key in the region.

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